Monthly Archives: May 2013

The most beautiful words in the English language are not “I love you”, but I told you so.Over the past five years here, my errors have consistently been in over-caution. People told me I was mad in 2008 when I first started telling Europe that the world was not running out of gas. They really started looking for the men in white coats when I said three years ago that the US had so much gas that exports were inevitable. Bakken, Eagle Ford, UK shale, East Africa gas, Australia underestimated them all.

So remember that when I tell you now:

France is shaping up to be the mother of all battles for shale energy.

And shale will win.

I’ve consistently noted that the big problem in France is the battle has been about shale gas, when the real issue should be oil. The Paris Basin is the European Bakken, with a potential for billions of barrels of oil. I’ve also been an unwavering optimist on the potential for shale energy and France. Have I been wrong? No. It’s just that I have been too early.

Let’s go to the video tape here, or the DVD to be exact and see how we got in the French mess, and how sooner than people think, we’ll be getting out of this

If Alexander Graham Bell had also created a medical breakthrough with an impact equal to his invention of the telephone and thus was alive today, a modern iPhone would be unrecognizable. On the other hand his 1880‘s contemporary Thomas Edison would find his leap forward still very familiar: Electricity generation from turbines powered by coal and hydro transmitted over wires.

This highlights how fundamentally conservative energy has been until this century which in turn, explains much of the disbelief and antagonism towards shale from the established order. We had the coal to oil switch, still not complete but starting in the 1900’s, the mass electrification of the 20’s, nuclear and pipeline natural gas in the 50’s and 60’s and then little of any note until the shale revolution.

Wednesday May 22 was a key date in shale energy in Europe with the UK release of the Institute of Directors report Getting Shale Gas Working coinciding with an EU Summit where shale was top of the agenda.

Arriving at the summit, British Prime Minister David Cameron, whose government is advancing plans to exploit his country’s shale gas deposits, said Europe could not afford to be left behind as the world scrambles to develop the resource.

He drew a comparison with the United States, where years of extraction, using a much-criticised process of hydraulic ‘fracking’, has delivered record-low gas prices for consumers.

“We mustn’t be left behind in the global race,” Cameron told reporters. “Europe has 75 percent of the United States’s shale resources, but America is drilling 100 times faster than Europe.”

Is this the same David Cameron who told us shale is years away after his Eton chum Sam Laidlaw of Centrica told him so at a Number 10 meeting that didn’t bother to ask plebs like the British Geological Society or Cuadrilla Resources for their input? Apparently so, but there have been two recent changes. One was the arrival of Peter Lilley MP into the inner circle at Number 10, and the other was the surge in support for UKIP, the right wing party that has at least one half-rational policy, going for shale gas.

As they say, a week is long time in politics, and I’m happy to forget the 18 months squandered by the UK and be thankful that the down-slope on the other side of the tipping point will be faster than the uphill.

One should expect that as someone who runs a consultancy based on public acceptance of shale gas, I have a vested interest inflating the issue, much as many energy policy analysts appear to have more interest in perpetuating problems than solving them.

Certainly, on the conference circuit, within academia and among financial research, public acceptance (PA) is the issue du jour. This from the UK Energy Research Centre is but a random example:

To become a major developer of shale gas, Europe must overcome a variety of issues and the strongest challenge will be fierce public opposition.

Not wishing to talk myself out of a job, and at the same time not wanting to minimise the size or importance of the issue and the task it presents, here are some of my views:

While Germany was able to barely sidestep a recession in the first quarter, France slid into one, according to the data on Wednesday from Eurostat, the European Union’s statistical agency. The French president, François Hollande, observed the occasion at a news conference in Brussels by indicating that his country should not be singled out for criticism.

I’ve written a lot in the past on France, and regular readers know that as a Francophone progressive, I have a very positive view on France compared to most Anglo-Saxons, but the time hascome to single France out.

There’s not been much news from Poland lately and people are mistaking silence with bad news. As this guest post from James Elston shows, there’s been a lot of positive activity:

As I suggested in my October 2012 article on this forum, 2013 is the make or break year for the Eastern Poland Shale Plays whilst activity is growing in the Permian Basin Carboniferous plays to the southwest. Sentiment towards nascent Polish shale gas exploration has worsened with Exxon partially withdrawing and Marathon and Talisman pulling out, all more for portfolio reasons than anything else.

Another guest post, this time from Andrew McKillop . He has green energy and sustainable development experience dating back to the ’70s and has long experience at DG Energy at the European Commission. His words, originally published at Market Oracle, prvides a reality check for left and right together:

EYES SET WEST European policymakers at Commission level, in European Council of ministers meetings, and in national governments now curtly say that the shale gas issue is “very political”, because the subject will not go away. Allowing shale gas extraction by hydraulic fracturing to move ahead is already politically correct – in some countries such as Poland – and may soon also become correct in the UK, France, Germany, Spain and Italy. The logjam is breaking.

A key part of the animosity from opponents of shale is manifested in arguments over whether UK shale gas would, or would not, have any impact on gas and electricity bills. A key part of the issue has been the steadfast refusal of the Big Six supply companies, abetted by the regulator Ofgem, to make components of bills transparent. I wrote on this last year in a post called What’s wrong with UK Energy Prices and How to Fix Them.

The opposition has two main components.The first, or why bother tendency, argues the Big Six, Ofgem, the government and oil and gas companies are all crooks and why trust anyone so let’s not even bother looking for shale. The second is more rational, but only half right: their correct point is that UK shale gas will be priced at international market forces, so therefore UK gas and electricity prices will rise. Where they are wrong is an unwillingness to cast off price formation theories based on the outdated concepts of the pre-shale/Peak Oil era.

This school at least understands that natural gas is world commodity, even if we are forbidden by UK regulators to know what the actual cost components are. It’s only right and proper that UK citizens should have confidence on regulatory expertise, but just as in retail market transparency, Ofgem’s view are to be found wanting. The infamous Project Discovery of 2009 dates from an era when shale gas was barely known outside of North America, yet is still used today as a template for prices for the next ten years. The failure to understand current world market forces leads to a concomitant failure to understand that world -and UK wholesale prices aren’t rising anyway.

The big news this week has been Cuadrilla’s plans to drill in Balcombe, West Sussex starting next month. What seems to have been missed by many including the BBC, Guardian, Independent and Daily Mail has been one minor detail.

Peter Atherton, former Managing Director UK Utilities at Citi for over 12 years (after a career in strategy at National Grid) and now at Liberum Capital needs to be taken seriously by the hundreds of “expert” hangers-on who have had a profitable career failing upwards in a group the past few years.

There are two types of expert: The bottom rung follow the leaders and the top ones suffer the curse of originality. The curse means admitting what the crowd will never dare: They were wrong. Examples include Dieter Helm, Atherton, Ed Morse still of Citi, Adam Sieminski of the US Energy Information Administration, Navigant Consulting, and of course Daniel Yergin, all united in admitting that the shale revolution came out of nowhere and disrupted everything.

The rest, in the UK sense, have both a vested interest in promoting energy as a problem and a basic level of insecurity surrounding their competence. The traits combine in a steadfast refusal to countenance any suggestion they could possibly be wrong. But to be fair, much blame lies with their clients. Clients seek certainty and due to their ignorance of the subject, they get stuck in a cycle where they punish original thought and then complain they aren’t getting good returns, and end up shooting the messengers.